Reducing two very different offers to one number

How to reduce base, bonus, equity, provident fund and benefits to one honest annual figure, and which non-cash terms are worth more than they look.

The short answer: Two offers with different structures cannot be compared by looking at them. Reduce each to one annual figure by adding base, expected bonus discounted for its actual variability, employer retirement contributions, the cash value of benefits you would otherwise buy, and any joining amount amortised over the time you expect to stay — then subtract the costs the job imposes, particularly commuting and relocation. The number that comes out is usually closer between two offers than the headline figures suggest, which is the point: it stops a large bonus that may not pay from dominating a decision, and it makes the non-cash terms visible rather than ignored.

Key points

Discount a variable bonus by how often it actually pays at target — a guaranteed rupee is not a maybe-rupee.
Employer retirement contributions are real compensation and are routinely left out of the comparison entirely.
Subtract what the job costs you: commuting time and money, relocation, and any benefit you now have to buy yourself.
Convert everything to one annual figure before deciding, and then decide on the non-financial factors, which usually matter more.

Reducing an offer to one number

Effective annual value: Base + (Bonus × payout rate) + Employer retirement + Benefit value + (Joining ÷ expected years) − Job costs

Base — the contractual annual salary.
Bonus × payout rate — target bonus multiplied by the share of target historically paid.
Employer retirement — provident fund, pension or superannuation paid by the employer.
Benefit value — what you would otherwise pay for health cover, insurance or subsidised services.
Joining ÷ expected years — a one-off spread over how long you realistically expect to stay.
Job costs — commuting, relocation, and any benefit you lose and must replace.

None of the terms is difficult. The reason people skip the exercise is that it takes twenty minutes and the headline numbers are right there — which is exactly why offers are structured to make the headline number the attractive one.

Two offers, worked

The higher headline is not the better offer

Offer A — base: ₹18,00,000
Offer A — bonus: 20% target, paid at ~50% historically → ₹1,80,000
Offer A — employer PF: ₹86,400
Offer A — health cover: Self only → ₹0 additional value
Offer A — commute: 90 min each way; ₹60,000 a year in travel
Offer A — effective: ₹18,00,000 + 1,80,000 + 86,400 − 60,000 = ₹19,06,400
Offer B — base: ₹16,50,000
Offer B — bonus: 10% target, paid at ~100% historically → ₹1,65,000
Offer B — employer PF: ₹1,98,000
Offer B — health cover: Family floater worth ~₹35,000 to replace
Offer B — commute: 25 min each way; ₹18,000 a year
Offer B — effective: ₹16,50,000 + 1,65,000 + 1,98,000 + 35,000 − 18,000 = ₹20,30,000

Offer A leads by ₹1,50,000 on base and trails by roughly ₹1,23,600 once everything is counted — before valuing the 270 hours a year Offer B gives back. Every figure here is illustrative; the method is the point.

Budget Builder: Once you have the effective figure, the Budget Builder shows what that take-home actually supports month to month — which is the question underneath the comparison.

What the number cannot tell you

The arithmetic exists to stop a misleading headline dominating the decision. It does not make the decision, and treating it as though it does is its own error.

What you would learn. Two years of real skill development is worth more over a career than a difference of a few percent in year one — the compounding argument in the first ten years.
Who you would work for. The single largest determinant of whether a job is tolerable, and almost impossible to price.
Where it leads. Some roles have wide exits and some narrow them. Worth asking about explicitly at offer stage.
Stability. A higher offer from a business under obvious pressure is not the higher offer if it lasts eleven months.

Do the arithmetic first, then decide on these. Doing it in the other order lets the headline number colour the qualitative judgement, which is precisely the effect the exercise is meant to remove.

LifeMap: LifeMap is built for the comparative version of this question — run the same starting position twice with different salary paths and compare the two curves rather than reading either as a forecast.

Frequently asked questions

How should I value a bonus that is not guaranteed?

Ask what percentage of target has actually been paid over the last three years — a reasonable question at offer stage, and the answer tells you a great deal about the employer whichever way it goes. Then discount accordingly. A 20% target bonus that has paid at half of target is worth 10%, not 20%, and treating it as guaranteed is the single most common error in comparing two offers.

Does the employer provident fund contribution count?

Yes. It is money paid on your behalf into an account that is yours, and leaving it out understates an offer that contributes more. The same applies to any employer pension or superannuation contribution in other markets. It is less liquid than salary, which is a reason to weight it slightly lower, not a reason to score it at zero — see [EPF and NPS](/learn/epf-nps/epf-vs-nps).

How much is a shorter commute worth?

More than most people account for. An hour a day each way is roughly ten hours a week and around 450 hours a year, plus the direct cost. You do not have to price your time precisely to notice that this frequently exceeds the gap between two offers. It is also the factor most reliably underestimated at the point of accepting and most reliably resented a year later.